Angel fund to focus on women and minority businesses

Madison, Wis. – Amid reports that high net worth women represent a largely untapped source of capital for start-up businesses, Wisconsin’s first angel fund focusing on investments in women and minority-owned or managed businesses was officially launched at the State Capitol.

The Wisconsin Women’s Angel Fund, announced by members of the women-led Phenomenelle Angels Fund, will initially make available $2.3 million in capital to early-stage companies, and its eventual goal is to have $10 million in the fund.

Wisconsin-based companies will be the first priority, but investors also may look for worthy investments elsewhere in the Midwest. Madison attorney Joe Hildebrandt, legal counsel for the Phenomenelle Angels Fund, said investors are conducting due diligence on two Wisconsin companies that may secure the first investments from the Women’s Angel Fund.

“I would say it would probably take a few weeks yet,” he said of the investors’ timetable.

Lorrie Keating Heinemann, secretary of the Department of Financial Institutions, said the Women’s Angel Fund fills an important gap in the investment stream for entrepreneurs, and provide capital and access to mentors who are experienced entrepreneurs and investors. She noted that an April 28 report issued by the Ewing Marion Kauffman Foundation, which promotes entrepreneurship, said there are only six women angel networks in the entire country, and only 8 percent of all angel investments made in 2005 included women angel investors.

Heinemann believes that having a diverse group of decision-makers in the boardroom or in an angel network provides a receptive audience for entrepreneurs with innovative business ideas, which will stimulate job creation in Wisconsin. “Realizing our state’s potential requires higher growth rates, including among women entrepreneurs,” said Heinemann, who chairs the Wisconsin Technology Council’s Angel Advisory Committee.

The Kauffman Foundation report, titled Women and Angel Investing: An Untapped Pool of Equity for Entrepreneurs, said of the estimated 225,000 active angels, no more than 8 percent are female. Those angels invested $23.1 billion in nearly 50,000 entrepreneurial deals in 2005, according to the Center for Venture Research at the University of New Hampshire.

The total number of women angel investors, the report said, is smaller than women’s collective wealth, education, and experiences suggests is possible. “Considering that women’s financial power and wealth have grown in the past 20 years – approaching half of the nation’s net worth – it appears women are under-represented in this type of investing and that we are missing an opportunity for new investments and perspectives,” said Carl Schramm, president and CEO of the Kauffman Foundation.

In Wisconsin, angel investors have access to tax credits under Act 255, which established the Wisconsin Angel Network (WAN). The act is credited with increasing the number of angel networks and angel investments in the state. Angel investors claimed all of the available 2005 tax credits ($3 million), which resulted in investments totaling $15.5 million in qualified new business ventures. Overall, angel investing in Wisconsin in 2005 exceeded $19 million, according to a report by NorthStar Economics, Inc.

State Commerce Secretary Mary Burke would like to double the available tax credits in the next biennial budget, but that depends largely on the state’s fiscal situation.

Early-stage women and minority owned companies interested in attracting angel funding could post a 1,000-word executive summary on their business on the WAN web site, which promotes deal flows. “Member investors are automatically notified of the executive summaries,” said Joe Kremer, director of WAN.